The NSE Nifty and BSE Sensex moved up and stayed strong throughout the trading session, driven by a stronger rupee and other global factors
After Thursday’s reversal and a three-day break, the markets opened the week strong and stayed strong throughout the session that was surprisingly devoid of volatility, a signal the bulls seems to be telling the bears that they are in charge. The Sensex is nearly at its two-week highs, recouping almost all of last week’s losses. The gains were led by rupee revival and global factors.
The Sensex opened at 20,570 (incidentally also it’s “low”) and hit a high of 20,868. The Sensex closed at 20,850 (up 451 points or 2.21%) while the Nifty, opened at 6,111 and hit the low almost at the same level of 6110. The Nifty hit a high of 6,196 and closed at 6,189 (up 132 points or 2.19%).
All sectoral indices were in the green. Bank Nifty, Finance, Infrastructure were all strong, moving up 3.06%, 2.91%, 2.49% respectively.
Of the 50 stocks on the Nifty, 43 ended in the green. The top five gainers were JP Associates (6.72%); L&T (4.31%); ITC (3.83%); HDFC Bank (3.78%) and Axis Bank (3.70%). The top five losers were Sesa Sterlite (1.55%); Coal India (1.40%); NMDC (0.42%); Lupin (0.40%) and Bajaj Auto (0.38%).
Of the 1,228 stocks on the NSE, 763 rose, 441 fell while 54 remained unchanged.
According to Reuters, investors cut bearish bets on regional units, with the dollar softer amid uncertainty over how long the US Federal Reserve will keep up its policy stimulus. The rupee rose 1% on the back of positive sentiment driven by local and global factors, especially China economic reforms.
Asian markets were seen trending up on news of a more detailed wording of China “reforms” after the Chinese government was more clear. The world cheered when the Chinese authorities announced bold economic reforms in which markets would play a more active role, as part of the country’s “10-year plan”. Nikkei finished flat, Hang Seng closed 2.73% up while the Shanghai Composite index was 2.87% up thanks to major reforms announced by China’s political leadership.
However, despite the bullishness all around, commodities softened a bit, especially gold and crude oil.
Europe too was trending up after a weak start. However, the economic situation was much weaker than the European Central Bank had hoped, according to ECB Governing Council member Ewald Nowotny.
Despite good job numbers that were released in the last few weeks, worries linger over the long-term health of the American economy. However, the US markets did close strong on Friday, with Dow Jones moving up 86 points while S&P moved up to 1,798. This was driven by assurances given by Dr Janet Yellen, who is seems more dovish than her predecessor Ben Bernanke. The US futures were seen up during early trade.
Both the World Gold Council as well as RBI governor, Raghuram Rajan, admitted a spurt in gold smuggling into India, after the government imposed curbs on gold imports. Unlike the 1970s and 1980s, this time, gold is being smuggled through air routes and India's porous borders with Nepal and Bangladesh
India’s gold market has been subject to much scrutiny in recent months, as the government has implemented a string of measures intended to deliver on its firm commitment to reduce imports of the yellow metal. However, the increase in import duty has given rise to the 1970s gold smuggling trend that was made glamorous by Bollywood in partnership with Haji Mastan, the ‘once upon a time’ Don of Mumbai. This time though, there appears to be several players who are using smuggling route to fulfil demand by the gold industry.
According to World Gold Council, gold entering the country unofficially through India’s porous borders helped to meet pent-up demand, together with an influx of recycled gold that was drawn out by higher prices and promotions offered by retailers during the third quarter to end-September. "Heading into the fourth quarter, and the major Hindu festive season, latent demand among Indian consumers remains very strong, as reflected in the persistence of local price premiums above the international gold price. It is likely that unofficial gold will continue to find its way into the country to satisfy demand. Reports that a good market for 10-tola (100grams) bars is re-emerging, due to the relative ease with which they can be concealed, reinforce this view," the WGC said in a report.
Reserve Bank of India (RBI) governor Raghuram Rajan has admitted that there is increase in gold smuggling. However, he said it has been on a very low base and the shrinking of current account deficit (CAD) had largely to do with the restrictions places on gold imports.
Demand for gold jewellery among Indian consumers remains strong, but reduced supply has prevented this demand from being fully realised during the third quarter. The year-to-date demand for gold till September end, in India increased 13% to 452.2 tonnes. However, this is just 18% below the total demand for 2012. During the September quarter gold demand in India fell 23% to 104.7 tonnes, says WGC.
The Indian government hiked the gold import tariff value to $442 per 10 grams from $436 per 10 grams over the past one month. The increase in import duty on gold to 10% by India has created a gap in gold prices with places such as Dubai and Thailand where the duty is just 1%. This has give rise to gold smuggling in the country. There are several cases of gold smuggling being reported from across places in the country.
According to Kiran Kumar Karlapu (@Scarysouthpaw), a government official, gold smugglers have started to move from low cost carriers like Air India and Jet or Indigo to luxury airlines like Emirates and Singapore Airlines. He said, “Smugglers operating from high price flights/business class seats have made us start to suspect every individual walking out of immigration. Fact that a smuggler could afford to purchase a business class ticket is fact of the terrific margins smuggling is giving smugglers.”
"While smuggling of the 1980s was heavily concentrated around Dubai- Bombay flights, this time around it is dispersed all over Middle East. Passengers have been caught on flights from Riyadh, Amman, Muscat, Bahrain and even Dhaka and Mauritius trying to smuggle in gold. Routes like Qatar, Bahrain and even Istanbul, which were historically non-sensitive, have seen passengers caught trying to smuggle gold in India. The only Middle East sector flights which have remained untainted by Gold smuggling are ironically Tehran-Bombay and Tel Aviv-Bombay routes, "he said in his tweets.
Earlier this month, officials of the Directorate of Revenue Intelligence (DRI) arrested two women, including an air hostess at Karipur International Airport for smuggling six kilograms of gold, valued at Rs1.84 crore.
However, according to a report in Times of India, smugglers are now flying consignments of gold to Bangladesh and Nepal and then using couriers to carry them across the border.
"In the past few months, over 50kg of gold worth more than Rs15 crore has been smuggled across the Indo-Bangladesh border alone. This year (up to October), close to 800kg of smuggled gold has been seized. This is more than double of last year's haul of 350kg," the report says.
According to WGC report, Thailand is being used as a route to channel gold into other markets, notably India and Vietnam. The increasing prevalence of small gold bars within jewellery retailers across the Asian region supported demand in Thailand. At the same time, in India, the main focus of demand during the quarter was on small gold bars; indeed, a shortage of 100gms gold bars pushed premiums on these products significantly higher by the end of September, the report said.
How much gold can one bring from abroad?
As per the law, Indian citizen is allowed to carry 1kg of gold into the country, provided he/she declares and pays duty on it. Here are some interesting points (as shared by the officials on Twitter) about gold smuggling and subsequent action depending on the value of the yellow metal.
1) Less than Rs20 lakh: No arrest
2) Between Rs20 lakh to Rs1 crore: Arrest with bail and prosecution
3) More than Rs1 crore: Arrest without bail and prosecution
The gold smugglers of Mumbai
During 1970s, India saw emergence of gold smuggling by gangsters like Mastan Haider Mirza alias Haji Mastan. He made millions through smuggling gold, silver and electronic goods and was once arrested and detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities (COFEPOSA) Act during the Emergency. However, after setting up a political outfit, he never indulged in smuggling again, says a report from Wikipedia.
The US quantitative easing (QE) programme may continue in 2013 it is likely that any tapering may be delayed much beyond March 2014, says State Bank of India (SBI) in a research report.
"The dynamics of US economic recovery will require that housing prices recover appreciably which may feedback into consumption and pull the economy out of recession. However, likelihood of the same looks grim, at this point of time. We thus continue to maintain that, time may not be ripe for a QE tapering in 2013," the report said.
It said, although the non-farm payroll in the US may have witnessed upward revisions in August and September 2013, overall the unemployment situation is still not responding adequately to Fed stimulus. The reasons possibly are firstly, the US labour markets have created part-time jobs and that to involuntary part-time jobs have been very high suggesting that employers do not want to hire full time workers. Secondly, small enterprises which have contributed to employment growth in the past, between 2007 and 2012, their share of total net job losses was nearly double their 30% share of total employment. The spike in October employment numbers is also seasonal, as more jobs have been created in retail trade, a trend more likely prior to festive season in West. Finally, the labour force participation rate is declining in the US because of the aging population, pushing down the unemployment rate in the process, the report said.
SBI said, with the new Fed chief floating the theory of “Optimum Control”, it also believe easy monetary policy will continue beyond 2015. It said, "Given that post QE tapering the US economy cannot handle a 10-year yield in excess of 3%, the Fed is floating its new approach. The new approach will entail the Fed keeping its overnight rate near zero into 2017 in order the get the economy moving. Such a commitment for keeping overnight interest rates longer should clearly anchor long-term bond yields and facilitate a taper of QE as and when it happens. All in all, QE tapering in 2013 is ruled out and is hugely likely it may be delayed much beyond March 2014, the market consensus."